Loans of a Energy Future Holdings Corp. unit, the power producer taken private in the largest leveraged buyout six years ago, dropped after the company proposed a pre-packaged bankruptcy for Texas Competitive Electric Holdings.
A $3.8 billion loan for Texas Competitive coming due in October 2014 fell 1.25 cents on the dollar, the most in a month, to 74.3 cents, according to prices compiled by Bloomberg. In an initial plan proposed for the unit, which sells power on wholesale markets, first-lien creditors would forgive debt in exchange for equity in the parent company and $5 billion in cash or new debt, Energy Future said yesterday in a regulatory filing.
Texas’s largest electricity provider, formerly known as TXU Corp., was taken over in a $48 billion deal in 2007 led by KKR (KKR:US), TPG Capital and Goldman Sachs Group Inc. The buyout, which left Dallas-based Energy Future with more than $40 billion in debt, was a gamble that natural gas prices would rise and give its coal-fired plants a competitive advantage. Instead, U.S. prices fell to a 10-year low last year.
Energy Future and its units have retained law firm Kirkland & Ellis LLP and restructuring advisers Evercore Partners, while creditors have retained law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP and Millstein & Co., according to yesterday’s filing.
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